Daily roundup: The NFP shock still weighs on the dollar as Hormuz risk returns

The dollar is still the weakest major after Friday’s negative payrolls, but Monday’s Asian session brings renewed Middle East risk that is already supporting it.

Dollar still weak, yen losing its prop

• The US dollar is still the weakest major currency, after non-farm payrolls turned negative on Friday. This led to a decrease in bets on a Federal Reserve rate hike and pushed US Treasury yields lower, further pressuring the dollar.
• The Japanese yen, conversely, was the strongest major currency, poised to hold gains attributed to intervention. This comes even as BoJ board opinions are divided on the pace of rate hikes and some strategists suggest support for the yen is "designed to fail," contributing to persistent bearish sentiment over the medium term.
• The Mexican peso hit a five-month high on Friday, boosted by the weaker US employment data.
• Monday’s Asian session is already turning, though: with Middle East risk back on the table, the dollar is finding support again, and the yen is under pressure as the BoJ’s internal split moves to the front.

Asia developments and commodities

• China's July CPI cooled to a six-month low, with producer prices also declining. Despite this, the Chinese yuan showed a bullish tone against the US dollar, maintaining range-bound trade, according to UOB.
• WTI crude oil is trading near $79.40 in Asian hours, recovering the previous day’s losses. Talks on reopening the Strait of Hormuz are now described as fragile after an unconfirmed missile attack overnight — a reversal of last week’s de-escalation, which is what had been draining the risk premium out of oil.

Market sentiment

• Our proprietary FSI indicates "Greed" with a score of 65. The MRS stands at 64, suggesting the market is primed for movement, while the CTS is high at 80.